From 6 April 2016 married couples can elect to transfer up to £1,100 of their personal allowance to their spouse.
To qualify neither spouse must pay tax at a rate other than the basic tax rate, giving a maximum tax benefit to the transfer of £220. This relief is referred to as the ‘marriage allowance’.
Once an election is made for the marriage allowance this continues each year until it is withdrawn.
Rather confusingly some married couples are entitled to claim a different allowance known as ‘married couples allowance’.
This applies where one of the spouses was born before 6 April 1935 and reduces your tax bill be 10% of the allowance. The maximum allowance is currently £8,355 and the minimum is £3,220 dependent on income levels.
The recipient is usually the husband, but if he is unable to use the full relief the excess can be transferred to his wife.
Couples who qualify for the married couples allowance need to take particular care when considering their tax position as it is not possible to claim both of the above. In most cases the married couples allowance will be more beneficial, but sadly the only way to be sure is to crunch the numbers.
For more information, please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org.